ECO230Y1 Final: study notes ch6-8
Document Summary
Perfectly competitive market: a market in which there are many buyers and sellers, nobody represents a large part of the market, thus all firms are price takers. Imperfect competition: firms are aware that they can influence the price of their products, they can sell more only by reducing their price, thus each firm is a price setter. Linear cost function: c= f+ c* q www. notesolution. com. F: fixed costs, independent of the firm"s output c: marginal cost. * the f gives rise to economies of scale, b/c the larger the firm"s outputs, the less is the fixed cost per unit. * this ac declines as q increases b/c f is spread over a larger output. Profit maximization: mr=mc when p >ac, the monopolist is earning some monopoly profits. Oligopoly: several firms, each of them large enough to affect prices, but non with an uncontested monopoly (characterized by internal economies of scale) pricing policies of firms are interdependent.
